Will pricier soda lead to slimmer waistlines?

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Policies that can be set in motion with little more than the stroke of a pen can be very seductive. That’s particularly true with policies that appear to have the same hue as some major social problem, since lawmakers can use that problem as a rationale for the policy, and hope that no one thinks too hard about whether it’s logical to expect the policy to effectively address the problem.

Such is arguably what we’ve seen recently in the heated debate about universal basic income (UBI), and now it we are seeing it with the proposed sugar tax.

Though it may have some other benefits (e.g., capturing externalities of obesity), the sugar tax is often defended on the basis that there are a lot of obese people in modern-day Australia – including children – and many Australians take in far more sugar than health guidelines recommend, much of it in the form of sugary drinks. Hence, or so the argument goes, if we make those drinks more expensive through imposing a sugar tax, then people will buy less of them and obesity rates will dutifully start to fall.

As parents, we can make sugary drinks harder for our kids to access by not buying a lot of them in the first place. Schools too have choices about what to stock in canteens, and how to arrange and price food so that healthier things are within easier reach. A tax on sugary drinks also makes them less accessible, especially for cash-constrained people, and therefore may well reduce the consumption of those drinks – as has been seen in Mexico.

But are sugary drinks really the underlying cause of obesity? History shows us that sugary drinks have been around far longer than the modern obesity epidemic, which began in select developed countries around the late 1980s and early 1990s. Why were we able to resist the soda on the shelves for generations before the 1980s, after which we suddenly started succumbing to large quantities in the past generation? On the basis of layperson logic alone, sugary drinks cannot be the primary cause of the catastrophic rise in obesity we’ve seen in the internet age.

Evidence suggests that sugary drinks are more likely to be bought regularly by people in the lower income brackets of our society. Why then do lower-income adults buy large quantities of sugary drinks for themselves or their children? Are they ignorant of sugar’s health effects? Sadomasochistic? Trying to select the least-cost beverage option (water) but misfiring due to plain stupidity?

An alternative theory is that the reason for the initial kick-off in obesity rates, and some of the reason they’ve stayed high, is psychological. Evidence suggests that being lower-income can cause negative pressure on people’s self-esteem. The stress of being poor may have worsened as inequality has increased, and/or with the advent of globalized media, which provides access to unlimited stories about beautiful superstars to whom it’s very difficult for most real people to measure up. If modern lower-income Australians are already finding life pretty mentally exhausting, then they may not have the surplus mental strength required to resist buying unhealthy things (sugary drinks included) that will taste nice, and that their family and friends will enjoy and thank them for.

To the extent that obese people make poor food purchase decisions for psychological reasons, a tax on sugary drinks will do little to help them lose weight.

3 Responses to "Will pricier soda lead to slimmer waistlines?"
  1. low income people smoke more and drink more alcohol.

    you have a strange looking demand curve.
    If low income people gradually react to an inelastic demand curve why would they not react pretty quickly to a normal demand curve?

  2. I have always been dubious about a sugar tax. The major brands dominate the market. They are able to extract a price far in excess of what would be predicted by classical economics. Increasing the price slightly by a sugar tax would not have that much effect.

    The behavior of this market is much better explained by Behavioral Economics, rather than classical economics. It would appear to me that controlling the advertising would have better results, but is much harder to implement.

    I would suggest that our society introduce the concept of products and services that are legal, but undesirable. Included in this category would be prostitution, drugs, smoking and gambling. These products and services would not be able to be advertise, the supply would be regulated, and there would be public health campaigns to reduce usage.

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